Centrepay scandal: Labor to reform debit scheme to combat ‘predatory behaviour’

The Albanese government has pledged to reform the Centrepay debit system and has referred three energy companies to the regulator for using the system to wrongly take money from welfare recipients.

The announcement on Tuesday afternoon follows a Guardian Australia investigation identifying deep and ongoing failures with the Centrepay system, including its use by the major energy retailers AGL and Origin to wrongly take money from the welfare payments of former customers.

In other cases, Guardian Australia has revealed how unscrupulous rent-to-buy household appliance retailers have used the system to charge exorbitant amounts to vulnerable Australians, particularly in remote Indigenous communities, and how an extreme and disgraced Christian rehabilitation service used Centrepay to prop itself up financially.

The government services minister, Bill Shorten, described Centrepay as a usually "excellent" service that is being undermined by what he described as "predatory behaviour".

"We want to send a message to businesses that predatory behaviour is unacceptable, and we'll continue to work with regulators and put greater safeguards in place to ensure vulnerable people are protected," he said.

Shorten announced a review would take public submissions from Centrepay users and speak with businesses, consumer advocates and others. The review's focus has been shaped by several government departments, Anglicare, Mob Strong Debt Help, the Australian Council of Social Service and Economic Justice Australia.

Meanwhile, the government has also announced it has referred three energy retailers to the Australian Energy Regulator over their use of Centrepay. The government did not reveal which retailers have been referred, but it follows the Guardian's revelations that Origin and another energy retailer, Ergon, were in talks with Services Australia to return money wrongly taken from welfare recipients using the system.

AGL is already before the federal court on an allegation it wrongly took $700,000 from about 500 former customers using Centrepay over a period of years. The money has since been returned. Freedom of information documents obtained by Guardian Australia show its use of Centrepay hasn't been audited by the government for two years, despite the widespread overpayment allegations.

Shorten said the government would implement a range of "immediate changes" to the system prior to the review process. That included "increased scrutiny, accountability and consequences" for companies that use Centrepay to overcharge people.

It is also providing increased specialist support for customers who may owe significant overpayments and is improving communications with customers about any business that has been restricted from using Centrepay by the corporate regulator Asic.

"Our firm focus is on the people," Shorten said. "We want Centrepay to remain as a safe and useful financial tool for people on income support, but we must work across government to stamp out predatory behaviour."

The government says submissions to the review will close on 2 July and the review's report will be made public once complete.